Providers need to provide guidance

So the most controversial budget announcement by far has turned out to be free impartial advice. Which of course actually means guidance!!

Most independent commentators say providers cant be involved in this. At the point of purchase that seems sensible, as we are worried about product bias and mis selling scandals and poor choice. I get it, I’m actually supportive of that argument and have written about it on here before. But it’s not that simple is it?

500,000 or so retiring every year for next 10 years or so. The vast majority of them will not have pots that appeal to financial advisers.

I get we are saying MAS or TPR or a new body (would seem odd) could do it. But who pays? Will the members of the ABI stump up for this? What about those not in ABI. What about IMA members or Fund managers, who i think if they get their act together will be big beneficiaries. Would you split the charge equal across providers? The cost will be between £100m and £250m experts tell me, thats not insignificant. In the long run I think it’s great and will create demand for advice. But right now what will happen to the 350,000 or so a year retiring with pots too small?

What is it they really need? What is it they want? Who really wants to pay for a face to face meeting with someone with £25k in their pot?

The problem is for too many people £25k in their pot is a lot of money. You could argue the banks should pay as that is where the money will end up, or the holiday companies, or the car companies but pension providers or advisers? They get no benefit. The debate will run on this, and a simple, what must have seemed almost throw away line at the time, has turned out to be the biggest game changer for the industry.

But heres what Ithink. Providers needs to provide guidance and education well before customers reach retirement. There are millions of customers at 45+ with no adviser, no real help or support and they need to be communicating with those customers. Helping them understand the options. AE gets them started, but will employers keep them informed and keep helping them? Big ones will, but what about smaller ones, and self employed people?

I think there is a serious risk that we disregard providers role in educating customers to save more, and provide general information about decisions people have to make.

I also think we need to remember they also have obligations. Wake up packs are regulation, as are 6 weeks letters. There are voluntary codes around 5 and 2 years. these concepts are good. For sure they haven’t always been executed well, and I agree that some providers have profited (maybe even profiteered) from the confusion they create and the apathy of customers. But seems to me we should focus on making this process better, not discounting it.

Providers have access and scale and money to help raise the savings ratio. They can also help provide and deliver general messages about options and risks. They also have as it stands a regulatory requirement on communicating pre retirement messages. We should make this stuff clearer and simpler. With clear routes for further impartial guidance and advice.

I think the message to providers is clear, stop making money by confusion. The direction is set, and I don’t think providers will be able to get away with the dark arts of the past – thats a great thing. But closing the door on their ability to educate and make money by delivering good outcomes seems wrong.

I get there is scepticism about providers, but we need everyone to work together to solve this problem. It feels we run the risk of throwing baby out with bath water.

Providers can atone for the sins of the past, and help save for a better retirement, make it easy for the millions who can’t or won’t seek financial advice. Help people grow their retirement pots, so fewer people in my generation are faced with retirement pots of less than £30k.

And the more people we have with larger pensions the more they will be inclined to take advice.


8 thoughts on “Providers need to provide guidance

  • Bit strange after all of the changes that you want to promote providers.

    Isn’t our job giving advice ?

    It is still money even if it is a lot of little bits – funds and consequent remuneration !

    Fruit trees usually have a bit more than low hanging fruit for those prepared to look a bit harder for ways to harvest it.

    • Hi phil. I don’t disagree. But my limited experience of advised market is typically sub £50k clients aren’t that interesting. Also I agree re advice. What I’m talking about here is education. I know from my own experience in helping family and friends as they approach retirement many Dont even know they have choices to make. Providers hav played their part I saw one example recently with over 30 forms to complete or at least looked like thy might. Only one wa needed.

      But providers have scale and reach can they make the shift? Time will tell. But in run up to decisions. Long before the guidance or advice moment at retirement is needed I think they can play a part in educating.

  • Hi Dave,

    I am in business and I see my objective as finding ways of making money efficiently.

    If I have to work on 1% for a lot of small sums there are plenty of ways of using technology to make the job interesting and profitable – especially interesting for the client who may bring along good referrals which I think is what people say they want.

    These blogs get too caught up with what is after all a very small number of so called HNW’s and in my opinion the focus should be on helping each other to make money from the market at large – AND IT IS VERY LARGE.

    • Thanks Phil

      I agree with you. Lots of 1 percents add up. Also advisers tend to build engaging websites far quicker and better than traditional product providers. I just don’t think the wider adviser community on mass agrees. As you say the blogs talk about high net worth. I’m not sure enough advisers will see it your way and change the business model.

      Given that its hard to see we’re the next generation of savers will come from as how they will be informed and engaged.

  • Hi Dave.
    Providers don’t have the resources or the right culture to offer impartial guidance.
    It’s evident that a lot more people will be needed to provide the face to face guidance promised.
    And there is a need for the work to be properly scoped too; most people have a number of different pensions, with different NRDs, none of which correspond with the date they want to retire (and for most people, retirement will be a long process, taking several years, not a specific date – have those old fellers in Homebase retired?). If you are going to get guidance about your pensions and retirement, it would make sense to get it from one organisation, on one date.
    So who could provide the guidance?
    The answer is a new organisation.
    The new organisation couldn’t be up and running by April next year.
    Someone needs to have a quiet word with the Chancellor and suggest to him that he might want to change the date to April 2020 if he wants his plan to succeed. If he doesn’t change the date, the project will fail.

    • Hi Philip.

      The focus is always on the decision making time. I agree its a challenge for providers to deliver impartial guidance at this point.

      Where I think they can and must help is the 20-30 years before. In engaging and helping people save sand prepare people for the decisions they do need to make.

  • Hi again Dave,

    I do find it strange that providers are figuring large in your mind as this suggests that traditional products are also a part of the future as you see it.

    As the industry settles down and product based ADVISER REMUNERATION starts to disappear in the rear view mirror then we will have a much more imaginative approach to the advice process and the use of ” products “.

    Advice will have to be seen to add regular value to any savings process and it is not possible for an adviser to add anything meaningful to a product over which they have no control.

    I understand the difficulties involved but I don’t think the future of our industry will come from its past and seeing the world as the domain of product manufacturers is not going to help anybody.

    Isn’t there a saying that if you keep doing the same old things you will get the same old results ?

    • Thanks Phil. Good debate.

      I agree with our future isn’t coming to come from the past. I think tho I don’t see a world where lots of small adviser businesses successfully compete for the scale and mass market.

      I think a few will attempt it and will of course have same success as start ups which will be mixed.

      So if I replace the word providers with business models. I see there is a huge gap in financial education and saving encouragement. The adviser community doesn’t have a single and clear voice. So I think it struggles to get the points across in a way you are doing here, to a wide audience.

      So what will fill the gap. Phil below suggests a new organisation. I think any new organisation will struggle.

      On the point if products. Of course we need to come up with new solutions. And in truth of tax relief has less value in the future. Not an unreasonable thought their will be less need for traditional providers. And I’ve been pretty clear on here in the past about how the profiteering of the past has no place in te future.

      I think though much in the same way as advisers have changed traditional providers am adapt. And I think whilst all the talk of death of advisers, there has been little until recently on death of providers. The challenge for many here will be too big.

      I do think some will adapt though and my observation is like minded business models with different things to offer an bein confident about the value try can bring should work together better.

      But that will, a you say only work, if its not rooted in the past.


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